Wondering if you should issue a credit card to your teenage children? Whether it is issuing a supplementary card or student credit card, granting them access can certainly be helpful, especially if it is inconvenient for them to carry cash or they are based overseas where wiring money to them can get cumbersome. On the other hand, leaving a credit card in the hands of a teenager can have its fair share of risk because they may end up misusing the credits due to a lack of knowledge and experience in money management. To help you decipher what is the right choice to make, this post will highlight some key information you should take note of.

Pros and Cons of Letting Your Teenager Own a Credit Card

Pro: Your Kid Can Have Quick Access to Funds in Case of Emergencies

Giving your teenage kids a credit card can be a great help during emergencies and there are last-minute requirements to make big purchases. Since they don’t have a regular source of income and are unlikely to have a big savings account that allows them to withdraw large amounts at a time, having a credit card can be a life-saver for them. A credit card can also be especially useful if they are studying overseas or travelling abroad. Holding a bunch of foreign currencies can be risky and cumbersome, while a credit card can give them peace of mind and help them transact easily with lesser communication barriers.

Pro: Earn Rebates and Perks for More Savings

Many student credit cards are designed with user preferences in mind, this means, if you choose the right card for your kids, they will get to enjoy extra perks when they spend at their favourite joints such as McDonald’s, Golden Village and Starbucks. These credit cards may offer even more savings with rebates, annual fee waiver and options to earn miles.

For example, the Maybank eVibes Card offers students 1% rebate on all of their spendings with no merchant or category restrictions, making it incredibly easy to maximise cashback. Additionally, students will have access to Maybank’s TREATS Programme, which offers everything from S$1 meals coupons to discounted amusement park tickets.

Con: Your Kids May Run the Risk of Overspending

Overspending is common amongst adults and it can be a problem for teenagers too. When using a credit card, it is easy to lose track of our spendings because we are not limited to physical monies in our wallets. The problem of overspending can amount to a bigger issue when unpaid debt is charged with interest. The average interest rate of credit cards in Singapore was about 25% per annum and if your teenage kids are not educated on how the credit card interest rate works or to repay their credit card bills promptly, they may end up with significant debt within a short period.

Con: Incurring Annual Card Fee

There is usually no fee for issuing an additional supplementary card; however, most student credit cards and young adult credit cards do charge an annual fee, so keep a lookout before signing up for your teenager. To make it worth your while, try to select cards that offer free or waivable annual fees for more savings.

➡️ Related Read: Canva Visa Card For Kids

Here is a list of the best students and young adult credit cards with the best annual fee offers for your reference:

What To Look Out for When Getting a Credit Card for Your Teenage Kid

Ready to get a credit card for your teenager? Here are some factors you should pay attention to:

Identify What Kind of Card Is Best For Your Teenager

How you go about selecting the right card depends on your kid’s lifestyle, preferences and the perks and control that comes with it. A student credit card is more likely to suit his or her lifestyle and spending habits. Most student cards also have a minimum age limit requirement of 18 to 21 years old and a credit limit of S$500. These basic criteria ensure that only more mature teenagers are allowed access to these cards and protect the bank from default risk since these card owners may not yet earn an income to fulfil monthly repayment. Overall, student credit cards give parents better peace of mind and control of the credit risk.

Alternatively, offering a supplementary card to your kid can save on additional annual fees; however, you’ll be liable for any late payments or unpaid debts from the supplementary card-holder. The upside is that you’ll have a full view of your child’s expenses and offer valuable advice to correct negative spending behaviour should you spot any irregularities.

Set Credit Limit to Prevent Overspending

Setting a credit limit on the credit card is the first step you must embark on before handing it over to your teenager. While it is important to trust your beloved ones, you’ll also need to exercise financial prudence. After all, teenagers are less financially savvy than you are, and they may not be mindful of potential pitfalls should they default on a payment. Importantly, explain to them the principles behind credit card interest rates and how they work. When you can properly illustrate how a rolled over bill can amount to hundreds and thousands in interest, they are more likely to think twice before using the card.

Set Credit Limit to Prevent Overspending

Setting a credit limit on the credit card is the first step you must embark on before handing it over to your teenager. While it is important to trust your beloved ones, you’ll also need to exercise financial prudence. After all, teenagers are less financially savvy than you are, and they may not be mindful of potential pitfalls should they default on a payment. Importantly, explain to them the principles behind credit card interest rates and how they work. When you can properly illustrate how a rolled over bill can amount to hundreds and thousands in interest, they are more likely to think twice before using the card.

Definite What the Card Can Be Used for

You do know that the credit card is only for emergencies, but is your teenage kid aware of that? Having a new credit card can be an exciting experience and this may tempt the young ones to use it on the go without giving a second thought. As a parent, you must impart financial knowledge and issue fair warnings so that they will not rack up a bill that is beyond what they can afford.

Start with a clear and defined list of what the credit card can and can’t be used for. Also, try to set limits on different categories of items if possible, this will ensure that your child will take a more mindful approach before he or she tabs to pay.

By ValueChampion.

Photos provided by ValueChampion.

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